REPORTING SEASON: Forescue Metals (FMG)
Brought to you by CommSec
Figure 1: Fortescue Metals Ltd 12 month chart
Fortescue Metals (FMG) missed annual profit estimates by 25%
? Fortescue Metals (FMG) posted a huge slump in annual profit to US$316m for the 12 months ended 30 June 2015. The result was ~25% below consensus and held back by lower iron ore prices (-55% over FY15) and boosted by improvements in productivity, efficiency (including cost cutting measures) and record shipments.
? Australia’s 3rd largest iron ore miner generates 94% of its revenue from selling ore to China and is extremely sensitive to economic stgelopments in the world’s second biggest economy. FMG accounted for 18% of China’s total iron ore imports in 2015. FMG said it achieved a realised price of US$57/dmt for its ore over the year and has US$2.4bn of cash on hand.
? Its debt position remains largely unchanged and uncomfortably high at US$7.2bn. Considering this is ~A$4bn above FMG’s market capitalisation (value on ASX), an external cash injection could be helpful. Media reports that a Chinese consortium is eyeing a stake in the ore miner surfaced in May.
? FMG will surprisingly pay eligible investors a modest A$0.02/s fully franked final dividend on 5 October, with 3 September as the ex-dividend date. This decision was made despite its mountainous debt and weak earnings. FMG spent US$343m on payments over FY15.
? FMG shares slumped following the consensus miss which takes its losses this calendar year to ~35%. Looking ahead, FMG has provided shipping guidance of 165mt for FY16; in-line with shipments made over FY15. No specific profit estimates were made for the year ahead.